© 2011IntroductionDubai was formed in 1971 and is located in the Middle Eastern region of the United Arab Emirates (UAE). Documented evidence indicates that Dubai city has the largest population and is second to Abu Dhabi in terms of area coverage (Abed and Peter 2001). Dubai’s geographical location shown in Appendix 1 and her excessive oil deposits have made the city an important trading hub in the UAE since 1966. These two conditions undoubtedly led to a massive influx of foreign workers who quickly expanded the city by 300% due to increased international oil interests as noted by Abed and Peter (2001).
This saw the city growing rapidly until the start of the Gulf War of 1990 that saw a number of depositors and traders withdrawing their money and trade respectively (Ali 2010). Fortunately, the city recovered in the ensuing changing political climate and thrived to what it is today: “a global city and a business hub” (Jim 2009). To date, Dubai has attracted world attention through many innovative large construction projects and sports events as observed by Ali (2010). But in view of the recent worldwide economic downturn of 2007–2010, it now becomes necessary to analyse the current state of Dubai’s economy with a focus on its short, medium and long-term future prospects.
The current state of Dubai’s economyThe Dubai region is shown by Schmid (2009) to have diversified into tourism, exhibitions, ICT, re-export and financial sectors as opposed to the single oil-based economy. Taking advantage of its position near the head of the Gulf, the city has consolidated her historical reputation as a regional open port. For this reason, Dubai has developed prestigious hotels, massive port facilities (including Jebel Ali Port which hosts more US navy ships than any other port outside the US) and a range of free trade zones to attract both manufacturing and services industries as noted by Krueger and Nandan (2008).
As earlier indicated, Dubai’s ambitious economic development started suffering during the 2007-2010 global financial crisis. But amidst this crunch, Dubai attempted to capitalize on the construction boom of 2008 by established itself as the preeminent regional hub for finance, trade, tourism, and shopping (Ali 2010).
This argument is supported by the fact that Dubai has the second largest amount of cranes after China. In line with this, Ali (2010) observes that about 15-25% of the world’s construction cranes are in operation in Dubai. These large scale real estate development projects have led to the construction of some of the tallest skyscrapers and largest projects in the world such as “the Emirates Towers, the Burj Khalifa, the Palm Islands and the world’s second tallest, and most expensive hotel, the Burj Al Arab” (Schmid 2009). Research shows that Dubai’s gross domestic product as of 2008 was US$ 82.11 billion (Jim 2009).
This economic growth is attributed to real estate and construction which accounts for 22.6% (Schmid 2009), while trade, entrepôt and financial services cater for 16%, 15% and 11% respectively. These figures had risen from respective figures shown in Appendix 2 as of 2000 (Jim 2009). These statistics are further supported by the fact that UAE’s market for heavy construction machinery stood at $165 million, that for road construction at $142 million and for earth moving at $125 million as of 2003 (Krueger and Nandan 2008).
The size is indicated to have increased by 15-20 per cent since then. Dubai’s current success is attributed to its bold and visionary leadership and innovative human resources. This success is further fueled by government policies that are aimed at improving the business and investment environment as well as initiatives that establish specialized zones and mega projects such as Internet and Media City, Healthcare City, The Palm, Dubai land (Marsh and Yencken 2004 qtd in Ali 2010). In my view, I believe that these developments ensured a leading role for Dubai and helped attract excess regional liquidity in the form of Foreign Direct Investment (FDI) in line with observations by Jim (2009).
This happened against the effects of the economic downturn of 2008 and 2009, which are being addressed through short, medium and long-term strategies discoursed below.